Wachovia yesterday upgraded Bermuda-based insurance giant Ace Ltd. from market perform to outperform with a valuation range of $62 to $64.

Since the end of May, Ace has been down 10 percent compared to the 11-percent decline in the S&P 500. Therefore, the firm believes that the recent correction represents a good entry point.

Wachovia said, "We are projecting Q2 earnings per share of $1.92 (consensus is $1.90 with a range of $1.40-$2.05).

"Ace pre-announced that crop insurance losses from the Midwest floods should have a negligible impact on results.

"On the investment side, Ace has minimal sub-prime exposure. Nearly 90 percent of its $44 billion investment portfolio is in investment grade, fixed-income securities."

Wachovia also believes that Ace should benefit as its competitors are downgraded by the rating agencies.

Ace has an A+ rating from both S&P and AM Best while fellow Bermuda-based global insurer XL Capital was downgraded to A by AM Best in January and its A+ rating was placed on CreditWatch with negative implications by S&P on July 3.

Later this month, Ace shareholders will meet in Hamilton to decide on a proposal to move the insurer's holding company from the Cayman Islands to Switzerland - a move chief executive officer Evan Greenberg has said would effectively make Ace "a Swiss citizen".